Ten lessons from my book: “The Ultimate Trading Risk Management Guide”
A thread 🧵 👇
“The biggest mistake you can make in risk management is finding yourself on the wrong side of a trend with a large position size, stubbornly letting it continue to run against you without exiting. If you don’t know what to do in a market the safest thing to do is to go to cash.”
“Trades must be asymmetric; the downside risk is carefully planned and managed, but the upside profits are open-ended. This is a critical part of trading success.”
“Most profitable traders understand that the winning% for the best traders is only about 50%-60% regardless of trading method. Having big winning trades & small losing trades is an edge. Large losses are the primary cause of unprofitable trading across all time frames & methods.”
“You don’t have to be right all the time, you just need to be right big and wrong small.”
Allow winners to run as far as possible with the use of trailing stops; you could have a huge win with the right entry & trend. Know how much you will risk on any one trade, & don’t enter a trade where the upside is not at least three times your risk of loss if your stop is hit.
“It’s not the winning percentage of a trader that determines their profitability, but the size of all their winning trades versus the size of all their losing trades. This is the math that determines profitability.”
“The goal of trailing stops, like stop losses, is to put the trailing stop loss at a level that shouldn’t be reached if the trend is going to continue.”
“Position sizing is determined by the placement of your technical stop loss. The stop loss comes first, then your position size is based on the loss you would take if your stop loss is triggered and you exit the trade for a loss. Base position sizing on potential max loss.”
“A trader’s primary job is not to make money, but to protect what they already have so they can continue to grow their capital over time.”
“Working longer hours or working harder is how most professions make money, but this isn’t true for trading. The best trades come when you’re patient & wait for the right entry signal & set up. More trading doesn’t necessarily mean more profits, and it’s usually the opposite.”
Book link to: “The Ultimate Trading Risk Management Guide” 👇
10 lessons from “The Psychology of Money” by Morgan Housel
A thread 🧵
“Spending money to show people how much money you have is the fastest way to have less money.”
“Someone driving a $100,000 car might be wealthy. But the only data point you have about their wealth is that they have $100,000 less than they did before they bought the car (or $100,000 more in debt). That’s all you know about them.”
Ten lessons from my book “The Ultimate Guide to Technical Analysis”
A Thread 🧵 👇
“Technical analysis is the trading of price action, while fundamental analysis is the trading of value. These are vastly different things.”
“Technical analysis focuses only on price action & volume. The best use of TA is not the prediction of future price. It should be used to identify the path of least resistance, quantify the probabilities of what will happen next & identify a price of entry for a good R/R ratio.”
10 lessons from the book: “How I Made $2,000,000 in the Stock Market” by Nicolas Darvas
A thread 🧵 👇
“There are no good or bad stocks, there are only rising and falling stocks.”
“I did not know it but I was already coming up against one of the great pitfalls of the small operator—the almost insoluble problem of when to enter the market.”
His answer was to entry on breakouts of momentum to the upside in stocks in uptrends.
Ten lessons from my book: “The Ultimate Guide to Candlestick Chart Patterns”
A thread 🧵 👇
The larger the candle, the higher the volatility of price action, and the smaller a candle is, the tighter a trading range has become. Increasing candle size indicates expanding volatility, while candles getting smaller shows contracting volatility.
Hammers have a higher probability of being a valid reversal signal when found inside a chart trending downward.
10 lessons from my book “New Trader, Rich Trader.”
A thread 🧵 👇
“You need to focus on a sound strategy, system, and trading plan and not profits. Good trading will create your profits, but focusing on your profits will usually lead to bad trading.”
“Before you place the trade, you need to have an exit strategy of how, when, and why you will take profits and what your stop loss will be. You have to plan to sell your stock at a specific percentage loss, price support breach, or trend change.”